Bank of America is warning that USD/JPY could move to 160 quickly, saying there is little prospect for the Bank of Japan to halt the rise with its communications.
The note from BoA was written before the latest upthrust in USD/JPY, through 155.00 during US trade on Wednesday.
BoA note that the BoJ has already said that a weaker yen could impact monetary policy via the impact on inflation. This hasn't been enough to support JPY and is likely to be not enough again if this is repeated by the BoJ in its statement coming up. (The BoJ meet on Friday, early preview here)
BoA say what would be required from the BoJ to firm up the yen:
- “it should acknowledge that policy has been too accommodative,
- that the next hike is as imminent as in June,
- and that the terminal rate would be higher than priced by the market.”
BoA then add that such communication from the Bank is unlikely.
The analysts note that if there is no intervention with USD/JPY above 155.00:
- “the market may ... bring USD/JPY to 160 quickly and test [the Bank's] resolve at that level.”
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USD/JPY popped above the latest in the long list of 'line the sand' levels at 155.00 overnight:
I did warn (repeatedly) about building intervention forecasts on shifting sands:
